S.34(3) Arbitration Act Time Limit Absolute, S.5 Limitation Act Inapplicable for Condoning Delay Beyond 120 Days: Allahabad High Court - 2024-05-13

Allahabad HC Upholds Strict Time Limit for Challenging Arbitral Awards, Dismisses Appeal Citing Delay

Allahabad: The Allahabad High Court, presided over by Hon’ble Mr. Justice Shekhar B.Saraf , has dismissed an appeal challenging the rejection of an application to set aside an arbitral award, reinforcing the strict timeline mandated by Section 34(3) of the Arbitration and Conciliation Act, 1996. The court found the application was filed well beyond the permissible 120-day limit and reiterated that Section 5 of the Limitation Act, 1963, cannot be invoked to condone such delays.

Case Background

The case involved appellants Sh. Dharmveer Tyagi and others whose land was acquired in 2015. An arbitral award concerning this acquisition was passed by the Arbitrator/Commissioner, Saharanpur, on March 15, 2018.

Instead of challenging the award under Section 34 of the Arbitration Act within the prescribed time, the appellants filed a writ petition (Writ-C No. 4985 of 2020) before the High Court on November 21, 2019 – approximately 18 months after the award. On February 20, 2020, the High Court disposed of the writ petition, observing that the appropriate remedy was an application under Section 34 of the Arbitration Act.

Following the High Court's direction, the appellants filed the Section 34 application before the Additional District Judge (ADJ), Court No. 1, Saharanpur, on July 13, 2020 (noted as July 17, 2020, elsewhere in the judgment), nearly five months after the writ petition's disposal and over two years after the arbitral award.

Lower Court's Decision

The Additional District Judge dismissed the Section 34 application as time-barred on March 22, 2024. The ADJ reasoned:

> "Admittedly, in this case the objection was filed beyond 120 days and therefore, the present application under Section 5 of the Limitation Act is not maintainable and the same is liable to be dismissed... Though, the applicants have mentioned that certain times were taken for getting certified copy of the order, but the applicants were already aware about the impugned order and also went to the Hon'ble High Court against that order. Thus, the applicants cannot take the advantage of its own mistake."

The ADJ noted that even if the time spent pursuing the writ petition could potentially be excluded under Section 14 of the Limitation Act (which was difficult as the appellants initially failed to provide the filing date), the subsequent delay of nearly five months in filing the Section 34 application post the writ disposal was fatal.

High Court's Analysis and Rationale

Justice Saraf , examining the appeal, affirmed the ADJ's decision, emphasizing the strict nature of the limitation period under Section 34(3) of the Arbitration Act.

Strict Statutory Timeline: The court highlighted that Section 34(3) allows an application to set aside an award within three months of receiving it, with a possible extension of only 30 days upon showing sufficient cause, "but not thereafter."

> "The usage of the phrase 'but not thereafter' in Section 34(3) of the Act is of immense significance. This seemingly innocuous phrase underscores the legislature’s intent to impose a strict and non-negotiable deadline for challenging arbitral awards, precluding the courts from exercising any discretion in granting additional time beyond what is specified in Section 34(3) of the Act."

Exclusion of Section 5, Limitation Act: The judgment heavily relied on the Supreme Court's decision in Union of India v. Popular Construction Co. (2001) 8 SCC 470 , which established that the phrase "but not thereafter" expressly excludes the application of Section 5 of the Limitation Act (allowing condonation of delay) to Section 34 proceedings.

> The High Court quoted Popular Construction : "As far as the language of Section 34 of the 1996 Act is concerned, the crucial words are “but not thereafter” used in the proviso to sub-section (3). In our opinion, this phrase would amount to an express exclusion within the meaning of Section 29(2) of the Limitation Act, and would therefore bar the application of Section 5 of that Act... To hold that the court could entertain an application to set aside the award beyond the extended period under the proviso, would render the phrase “but not thereafter” wholly otiose."

The court also noted that the objective of the 1996 Act was to minimize judicial intervention (Section 5 of the Act) and ensure timely finality, as awards become enforceable once the Section 34 time limit expires (Section 36).

Appellants' Conduct: Justice Saraf observed that even accounting for the time spent on the writ petition under Section 14 of the Limitation Act, the Section 34 application remained significantly delayed.

> "From the above factual matrix, it is clear that the appellants have had a lackadaisical and nonchalant approach to the entire affair and even after giving the benefit of Section 14 of the Limitation Act, Section 34 application would have remained time barred."

Importance of Timelines in Arbitration: The judgment concluded by stressing the need for adherence to statutory timelines to maintain the efficiency, integrity, and finality of the arbitration process.

Final Decision

Finding no grounds to interfere with the lower court's order, the Allahabad High Court dismissed the appeal (Appeal Under Section 37 No. 257 of 2024), confirming that the application to set aside the arbitral award was correctly rejected as being filed beyond the maximum permissible period of 120 days.